Thursday, September 3, 2009
New Report Explores how PPC Rank Affects Traffic
Citing a tenfold difference in traffic between the first position in a pay-per-click campaign and the tenth position in the same campaign, the Atlas Institute's latest report sheds some light on how rankings can impact traffic numbers. (The full report, titled "How Search Engine Rank Impacts Traffic" is available on the Atlas Institute's Web site.)
The Atlas Institute set out to examine the relative drop in traffic that takes place with each positional drop in rank on the industry's two most popular PPC engines, Google's AdWords and Yahoo!'s Overture.
Paid search marketers have long recognized the difference in traffic that comes with higher rankings. In many cases, advertisers are willing to pay whatever it takes to maintain the top spot in the rankings, simply to assure dominance in drawing traffic. For these advertisers, the Atlas report provides ample data to support their belief in the difference in traffic that can come with a number one ranking.
For example, the study showed that there was a dramatic 40% drop in traffic between the first and second paid positions in Google's AdSense program. Beyond position two, the traffic drops more gradually, losing about 5-10% of traffic per position drop on down to position number 10.
The study found similar results on Overture, though the difference between positions wasn't nearly as dramatic as those in the AdWords campaign. Overture listings experienced an average of 23% drop off from the first listing to the second listing followed by a second drop of around 20% from the second listing to the third. From there, the data shows similar drop offs as AdWords, ranging from 5-10% per position.
It is worthwhile to note that the lower half of the rankings experience much stronger click thru potential on AdWords than they do on Overture. Positions number five thru ten on AdWords experience click potential of 34.8%, 31.3%, 24%, 20%, 15.3% and 13.9% respectively. Those same positions on Overture have much lower click potential at 30.2%, 24%, 18%, 14.1%, 9% and 7.8%. Thus, companies that prefer to bid in the lower half of the listings may find they have more luck drawing traffic from AdWords campaigns than from Overture campaigns.
While the data presented in the study is interesting, it's important to note that click thru rates are not the only thing that should impact the planning of a PPC campaign. "Paying for the number one ranking may not be the best strategy for all advertisers" explained Young-Bean Song, director of analytics and the Atlas Institute, Atlas DMT. "For some marketers the cost of traffic associated with the top ranking may be too high. On the other hand, some marketers are forgoing the top spot, without really knowing how many customers they are losing to their competitors. Most advertisers don't know whether they are paying too much, or needlessly missing out on sales."
Competitive industries with low margins may find it tough to balance a strong pay per click campaign that delivers traffic without sacrificing profitability. A successful pay per click campaign ultimately boils down to the return on investment that the campaign can deliver. If a Web site owner spends $5.25 per click and only makes an average of $4.50 per sale, higher traffic levels will simply bankrupt him. Thus, it is essential for marketers to base campaigns not only around traffic levels but around realistic cost per click that factors in conversion rates and profit levels.
It's also interesting to note that despite the obvious loss in traffic that comes with lower listings, many marketers prefer to setup their ads to maintain lower rankings. Many marketers theorize that Internet users that take the time to visit multiple sites are more serious about buying and that the number one listing is often inundated with "impulse clickers" that are more curious than serious when it comes to buying. Online discussion forums that cover pay per click strategy are ripe with posters that explain they purposely position their ads below the number one position. They go on to explain that in those positions, they experience higher conversion rates and lower costs per click, which leads to much higher returns on investment than the same advertiser might have experienced with a more expensive number one ranking.
For marketers that have taken the time to analyze their campaign data, the research provided by Atlas could prove invaluable. Companies that have documented their conversion rates and break even points for various positions will be able to use this data to calculate the potential profit of bidding in each of the top ten positions and adjust their campaigns accordingly.
It is also important to note that the study applies only to pay per click listings bought via Google AdWords and Overture. The Atlas study did not examine the drop in traffic that takes place with organic listings, though they state on their Web site that they are currently compiling data on this topic and hope to release a report later this year.